Rising Youth Unemployment During The Crisis
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Please cite this paper as: Scarpetta, S., A. Sonnet and T. Manfredi (2010), “Rising Youth Unemployment During The Crisis: How to Prevent Negative Long-term Consequences on a Generation?”, OECD Social, Employment and Migration Working Papers, No. 106, OECD Publishing. http://dx.doi.org/10.1787/5kmh79zb2mmv-en OECD Social, Employment and Migration Working Papers No. 106 Rising Youth Unemployment During The Crisis HOW TO PREVENT NEGATIVE LONG-TERM CONSEQUENCES ON A GENERATION? Stefano Scarpetta, Anne Sonnet, Thomas Manfredi
Unclassified DELSA/ELSA/WD/SEM(2010)6
Organisation de Coopération et de Développement Économiques
Organisation for Economic Co-operation and Development 14-Apr-2010
___________________________________________________________________________________________
English - Or. English
DIRECTORATE FOR EMPLOYMENT, LABOUR AND SOCIAL AFFAIRS
EMPLOYMENT, LABOUR AND SOCIAL AFFAIRS COMMITTEE
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DELSA/ELSA/WD/SEM(2010)6
OECD SOCIAL, EMPLOYMENT AND MIGRATION PAPERS, NO. 106
RISING YOUTH UNEMPLOYMENT DURING THE CRISIS: HOW TO PREVENT NEGATIVE
LONG-TERM CONSEQUENCES ON A GENERATION?
Stefano Scarpetta, Anne Sonnet and Thomas Manfredi
JEL codes: J21, J64, J68.
English - Or. English
JT03281808
Document complet disponible sur OLIS dans son format d'origine
Complete document available on OLIS in its original formatDELSA/ELSA/WD/SEM(2010)6
DIRECTORATE FOR EMPLOYMENT, LABOUR AND SOCIAL AFFAIRS
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2DELSA/ELSA/WD/SEM(2010)6
ACKNOWLEDGEMENTS
This paper is a revised and updated version of the Background Paper on “Helping Youth to Get a
Firm Foothold in the Labour Market” that was presented at the OECD Labour and Employment Ministerial
Meeting “Tackling the Jobs Crisis: The Labour Market and Social Policy Response” that took place in
Paris on 28-29 September 2009.
Stefano Scarpetta is the Head of the Employment Analysis and Policy Division at the OECD’s
Directorate for Employment, Labour and Social Affairs. Anne Sonnet is the Youth Project Leader and
Thomas Manfredi is a statistician at the same directorate and division. Comments, suggestions and advice
from Martine Durand, Chang-Hun Han, John P. Martin, Glenda Quintini, Vincent Vandenberghe, other
OECD colleagues and the participants to the OECD Ministerial are gratefully acknowledged. The views
expressed in this paper are those of the authors and do not necessarily reflect those of the OECD or of its
member countries.
3DELSA/ELSA/WD/SEM(2010)6
SUMMARY
The global economic crisis has hit youth very hard. In the OECD area, the youth (15-24)
unemployment rate rose by 6 percentage points in the two years to the end of 2009, to reach almost 19%.
There are currently nearly 15 million youth unemployed in the OECD area, about four million more than at
the end of 2007. And in countries like France and Italy, about one active youth in four is unemployed,
while in Spain more than 40% of them are jobless.
An economic recovery is already ongoing in a number of OECD countries, but the short-term
prospects for youth unemployment in the OECD countries remain rather gloomy. The recovery is expected
to be rather shallow in 2010 and to strengthen only in 2011. And given the large spare capacity
accumulated by many firms during the recession, job creation is likely to lag significantly behind this
modest recovery. In this context, the youth unemployment rate is expected to stay at a high level over the
next two years and many unemployed youth are likely to experience a prolonged period of joblessness.
Coping with a job loss in a weak labour market – when job offers are scarce and competition among
jobseekers is fierce – is difficult for anyone. But for disadvantaged youth lacking basic education, failure to
find a first job or keep it for long can have negative long-term consequences on their career prospects that
some experts refer to as “scarring”. Beyond the negative effects on future wages and employability, long
spells of unemployment while young often create permanent scars through the harmful effects on a number
of other outcomes, including happiness, job satisfaction and health, many years later.
After a review of youth labour market developments in the OECD countries and the identification of
key underlying structural issues, this paper discusses what governments could do to minimise the possible
scarring effects of the crisis on youth and thus avoid a lost generation. About 30-40% of school-leavers in
the OECD are estimated as being at risk, either because they cumulate multiple disadvantages (the group of
so-called “left behind youth”) or because they face barriers to find stable employment (the group of so-
called “poorly integrated new entrants”).
In the short term, a key policy priority is to provide adequate support especially to youth most at risk
of losing contact with the labour market. In two-thirds of OECD countries school-leavers are not eligible to
unemployment benefits unless they have worked a certain period of time (from four months in France to
one year more generally). They can however receive social assistance in case of social distress as from the
age of 18 (25 in France, Luxembourg and Spain). The first line of defence is to provide income support to
the unemployed youth to help them sustain their job search. And in exchange for income support,
following the “mutual obligations” principle, young jobseekers should be required to search actively for
jobs and be given opportunities to participate in job-placement activities and in training programmes. The
latter are especially suitable for low-skilled youth jobseekers so as to consolidate their skills and enhance
their chances of finding a job when the economic recovery strengthens. That said, governments should not
underestimate the difficulties of implementing a labour market policy based on acquiring skills first, work
later, particularly for disadvantaged youth. The international evidence from evaluations of training
programmes for disadvantaged youth is not encouraging, and when unemployment levels rise suddenly, it
may be difficult to meet both quantity and quality objectives for training programmes.
A promising avenue is to promote more extensively apprenticeship contracts for low-skilled youth
where they can acquire at the same time skills and work experience. In fact, apprenticeships could pay a
4DELSA/ELSA/WD/SEM(2010)6
“double dividend”: securing the transition towards employment and lowering labour costs compensated by
a training commitment from the employer. In a downturn when employers are more reluctant to offer
places and some apprentices lose their job before completing training, governments could provide
subsidies to promote apprenticeship for unskilled young people and support measures to help apprentices
made redundant to complete their training. To enhance the potential stepping-stone effect of any
apprenticeship contract, employers should also be financially encouraged to hire their former apprentices
on a more permanent basis at the end of the apprenticeship.
The jobs crisis may also be an opportunity to tackle underlying factors affecting the school-to-work
transition. Further efforts should be made in many countries to ensure that no youth enters the labour
market without a recognised and valued qualification. This may imply that teenagers should be encouraged
to stay longer in education, provided that this is accompanied by measures to diversify educational choices
and focuses on the acquisition of a qualification that is valued by employers. School drop-outs also need
special attention from the education authorities to ensure they remain engaged in, or re-connect with,
education through the completion of an upper secondary diploma or its equivalent, preferably with an on-
the-job training component. Moreover, factors that tend to penalise youth even in good times should be
reconsidered. Youth are over-represented among workers on temporary contracts. And while for many
these contracts are stepping stones into permanent jobs, for others they tend to be dead ends. Reducing the
gap between regulations for temporary and permanent contracts will likely contribute to promote the
smoother transition of newcomers, including youth, from entry jobs with short duration to more stable jobs
that offer a good career prospect. Securing the school-to-work transition should go hand-in hand with
lowering the cost of employing low-skilled youth in their first job.
5DELSA/ELSA/WD/SEM(2010)6
RÉSUMÉ
Les jeunes ont été très sévèrement touchés par la crise économique globale. Dans la zone OCDE, le
taux de chômage des jeunes (15-24) a progressé de 6.5 points de pourcentage entre fin 2007 et fin 2009
pour atteindre près de 20 % (niveau désaisonnalisé). Il y a actuellement environ 15 millions de jeunes au
chômage dans la zone OCDE, soit environ 4 millions de plus que fin 2007. Dans des pays comme la
France et l’Italie, environ un jeune actif sur quatre se retrouve au chômage, alors qu’en Espagne, c’est le
cas pour plus de 40% d’entre eux.
La reprise économique est déjà manifeste dans un certain nombre de pays. Pourtant à court terme, les
perspectives sont plutôt sombres pour le chômage des jeunes dans les pays de l’OCDE. En effet la reprise
resterait hésitante en 2010 et ne deviendrait plus solide qu’en 2011. De plus, étant donné les capacités
importantes inutilisées accumulées par les entreprises pendant la récession, on s’attend à ce que les
créations d’emploi soient sensiblement retardées face à une trop faible reprise. Dans ce contexte, le taux de
chômage des jeunes devrait rester à un niveau élevé durant les deux années qui viennent et de nombreux
jeunes chômeurs sont susceptibles de connaître une période prolongée sans emploi
Perdre son emploi dans un marché du travail sans vigueur, alors que les offres d’emploi sont rares et
que la compétition est intense entre demandeurs d’emploi, est une situation difficile à gérer pour tous les
travailleurs. Mais pour les jeunes défavorisés qui n’ont pas acquis les savoirs de base, ne pas arriver à
trouver ou garder un premier emploi peut avoir des conséquences négatives à long terme sur leurs
perspectives de carrière ce que certains experts appellent des « stigmates ». Au-delà des effets négatifs sur
leurs futurs salaires et leur employabilité, de longues périodes sans emploi pendant la jeunesse créent
souvent des stigmates permanents de par leurs effets négatifs plusieurs années après sur différents aspects
de la vie comme le bonheur, la satisfaction au travail ou la santé.
Après avoir présenté l’évolution du marché des jeunes dans les pays de l’OCDE et identifié les
questions importantes qui se posent sur le plan structurel, ce document discute de ce que les
gouvernements devraient faire pour minimiser les stigmates que la crise pourrait laisser aux jeunes ainsi
que le risque d’une génération sacrifiée. Environ 30-40 % des sortants de l’école sont estimés comme plus
particulièrement à risque parce qu’ils cumulent de multiples désavantages (le groupe des « laissés pour
compte »), ou qu’ils sont confrontés à des barrières récurrentes pour trouver un emploi stable (le groupe
des « débutants en mal d’insertion »).
A court terme, l’urgence est de fournir une assistance appropriée, particulièrement aux jeunes qui ont
le plus de risque de perdre le contact avec le marché du travail. Dans les deux-tiers des pays de l’OCDE,
les jeunes à la sortie de l’école n’ont pas droit à des allocations de chômage sauf s’ils ont travaillé une
certaine période de temps (de quatre mois en France à un an plus généralement). Ils peuvent cependant
avoir recours à l’aide sociale s’ils sont démunis socialement à partir de l’âge de 18 ans (25 ans en France,
au Luxembourg et en Espagne). La principale ligne d’intervention est d’assurer une garantie de revenu aux
jeunes chômeurs pour les aider à continuer à rechercher un emploi. En échange de cette garantie de revenu
et selon le principe des « engagements réciproques », les jeunes demandeurs d’emploi devraient s’engager
à chercher activement un emploi et se voir offrir des possibilités de participer à des dispositifs leur
apportant de l’expérience professionnelle et à des programmes de formation. Ces derniers sont
particulièrement indiqués pour les jeunes demandeurs d’emploi peu qualifiés de manière à consolider leurs
qualifications et améliorer leurs chances de trouver un emploi quand la reprise économique sera
6DELSA/ELSA/WD/SEM(2010)6
vigoureuse. Cela dit, les gouvernements ne devraient pas sous-estimer les difficultés de mettre en œuvre
une politique du marché du travail basée sur acquérir des compétences d’abord, travailler après,
particulièrement pour les jeunes défavorisés. Les évaluations au niveau international des programmes de
formation pour les jeunes défavorisés produisent des résultats peu encourageants. De plus, quand les
niveaux de chômage augmentent soudainement, il peut s’avérer difficile de mettre en place des
programmes de formation en nombre et en qualité suffisants.
Une voie prometteuse est d’augmenter de façon nette les possibilités de contrats d’apprentissage
offertes aux jeunes peu qualifiés dans lesquels ils peuvent acquérir à la fois des qualifications et une
expérience professionnelle. En fait, l’apprentissage pourrait apporter un « double dividende”: sécuriser la
transition vers un emploi qualifié et baisser les coûts du travail compensés par un engagement de formation
de la part des employeurs. Quand l’économie ralentit, les employeurs sont plus réticents à offrir des places
d’apprentissage et certains apprentis peuvent perdre leur emploi sans avoir terminé leur formation. Les
gouvernements devraient alors offrir des subventions pour promouvoir l’apprentissage pour les jeunes non
qualifiés et mettre en place des mesures pour aider les apprentis qui ont perdu leur emploi à terminer leur
formation. Pour accentuer l’effet potentiellement de tremplin de tout contrat d’apprentissage, les
employeurs devraient aussi être financièrement incités à embaucher leurs anciens apprentis dans un contrat
plus permanent à la fin de leur apprentissage.
La crise de l’emploi devrait également être l’occasion de s’attaquer aux facteurs sous-jacents de la
transition de l’école à l’emploi. Des actions supplémentaires pourraient être menées dans de nombreux
pays pour s’assurer qu’aucun jeune n’entre dans la vie active sans être doté d’une qualification reconnue et
valorisée. Atteindre cet objectif impliquerait que les moins de 20 ans soient encouragés à rester plus
longtemps dans le système éducatif, du moment qu’ils puissent choisir entre une diversité de dispositifs
d’apprentissage et que l’accent soit mis sur l’acquisition d’une qualification valorisée par les employeurs.
Ceux qui abandonnent l’école ont également besoin de l’attention particulière des autorités de l’éducation
pour assurer qu’ils ne perdent pas le contact ou renouent avec l’éducation en préparant un diplôme du
deuxième cycle du secondaire ou un équivalent, avec de préférence une dimension de formation en
entreprise. Il faudrait de plus se pencher sur les facteurs qui ont tendance à pénaliser les jeunes même dans
les périodes de bonne conjoncture Les jeunes sont surreprésentés parmi les travailleurs en contrat
temporaire. Même si pour beaucoup d’entre eux, ces contrats leur permettent de rebondir vers des emplois
permanents, pour d’autres ils les font entrer dans la précarité. Réduire l’écart entre les règlementations des
contrats temporaires et permanents pourrait contribuer à rendre plus fluide la transition des débutants,
particulièrement des plus jeunes, de premiers emplois de courte durée vers des emplois plus stables qui
offrent de réelles perspectives de carrière. Sécuriser la transition de l’école à l’emploi devrait
s’accompagner d’une baisse du coût associé à l’embauche des jeunes peu qualifiés dans leur premier
emploi.
7DELSA/ELSA/WD/SEM(2010)6
TABLE OF CONTENTS
ACKNOWLEDGEMENTS ............................................................................................................................ 3
SUMMARY .................................................................................................................................................... 4
RÉSUMÉ ........................................................................................................................................................ 6
1. Introduction ............................................................................................................................................. 9
2. Recent trends in the youth labour market .............................................................................................. 10
3. Main structural issues affecting youth labour markets .......................................................................... 16
4. Key short-term challenges and policy options ...................................................................................... 21
5. The crisis as an opportunity to promote structural reforms ................................................................... 26
BIBLIOGRAPHY ......................................................................................................................................... 31
Tables
Table 1. Scoreboard for youth, 1998 and 2008 ...................................................................................... 11
Figures
Figure 1. Mixed performance of the youth unemployment rate in 2005-2007 compared with the
previous decade ........................................................................................................................ 10
Figure 2. Youth face a much higher risk of unemployment rates than adults, 2008 ............................... 12
Figure 3. Significant deterioration of the youth unemployment rate in 2007-2009 ................................ 13
Figure 4. Persistence of high youth unemployment rates in 2010 and 2011 ........................................... 14
Figure 5. Youth unemployment is more responsive to the cycle than adult unemployment ................... 15
Figure 6. High disparity of employment rates of youth aged 15-29 having left education
by educational attainment and country, 2007 ........................................................................... 17
Figure 7. The precariousness of youth jobs has increased in most OECD countries,
1998 and 2008 .......................................................................................................................... 18
Figure 8. Towards stable youth employment: impact of unemployment and the stepping-stone effect
of temporary jobs ..................................................................................................................... 18
Figure 9. NEET youth at risk of losing contact with the labour market, 2007 ........................................ 19
Boxes
Box 1. The potentially scarring effects of unemployment on youth .................................................... 16
Box 2. School-to-work transition pathways of students having left secondary education................... 20
Box 3. The Young Person’s Guarantee in the United Kingdom .......................................................... 22
Box 4. Unemployment assistance benefits for a young job seekerwho has never worked in OECD
countries ................................................................................................................................... 24
Box 5. Youth programmes funded by the Recovery Act of 2009 in the United States ....................... 24
Box 6. The Investing in Young People Act (WIJ) in the Netherlands ................................................. 25
Box 7. From an emergency plan to a strategy “Acting for Youth” in France...................................... 27
Box 8. The economic downturn as an opportunity to improve Australia’s educational attainment
while fighting unemployment .................................................................................................. 28
Box 9. Quick, intensive and focused approach towards youth in Denmark ........................................ 29
8DELSA/ELSA/WD/SEM(2010)6
RISING YOUTH UNEMPLOYMENT DURING THE CRISIS: HOW TO PREVENT NEGATIVE
LONG-TERM CONSEQUENCES ON A GENERATION?
1. Introduction
1. The financial and economic crisis is posing daunting challenges to young people in every
country. School-leavers are competing with more jobseekers for fewer vacancies, and employers have
become very selective in their hiring of new staff. Even for those youth already in the labour market but
with temporary jobs, the short-term outlook is grim: they have been among the first to lose their jobs and
are finding it particularly difficult to get another one (OECD, 2009a). More importantly, low-skilled youth,
who even before the crisis faced multiple barriers in finding work, are now at high risk of long-term
inactivity and exclusion.
2. The current crisis is exacerbating a number of structural problems that affect the transition from
school to work and the initial labour market experiences of youth with different levels of education.1 While
governments must push forward with the necessary structural reforms, they are also struggling to devise
suitable short-term measures to cushion the impacts of the crisis on youth – in a way which, as much as
possible, aligns with the longer-term reform agenda of promoting more and better jobs for them.
3. The short-term priority should be targeting youth most at risk of losing contact with the labour
market and tackling the key underlining labour market problems that were affecting the transition from
school to work for many young people even before the crisis. Both for the short-term response to the crisis
as well as for the longer-term agenda of improving access to jobs and career progressions, there is a strong
need of co-ordinated actions on multiple fronts, involving the education system, the labour market and the
welfare system.
4. This paper is organised as follows. Section 2 provides an overview of recent developments in the
youth labour market of OECD countries. Section 3 highlights the main structural issues affecting the
school-to-work transition and early career experiences of youth with different levels of education.
Section 4 discusses the key short-term policy challenges to cushion the impact of the crisis on at-risk
youth, while Section 5 discusses policy reforms that would be required to put youth on a better footing in
the labour market on a more permanent basis.
1. In response to a mandate from OECD Ministers, the OECD has undertaken over the past three years a
thematic review of Jobs for Youth in 16 countries. The nine reviews undertaken in 2006-08 (Belgium,
Canada, Korea, Netherlands, New Zealand, Norway, Slovak Republic, Spain and United Kingdom) took
place against the background of a buoyant economy (OECD, 2007a, b, c, d; 2008a, b, c, d, f). The more
recently released country reports (Japan in December 2008; Australia in April 2009; France in May 2009;
Poland in November 2009; United States in December 2009 and Denmark in February 2010, see OECD,
2008g, 2009b, c, d, e and 2010) contain detailed recommendations on how to tackle youth unemployment
problems in the context of the current crisis. The last country report on Greece will be released end-March
2010. A synthesis report highlighting the main issues and policy recommendations will be presented at a
High-Level Policy Forum on Jobs for Youth: Addressing Policy Challenges in OECD Countries. This
Forum jointly organised by the Norwegian Ministry of Labour and the OECD will take place on 20/21
September 2010 in Oslo, Norway.
9DELSA/ELSA/WD/SEM(2010)6
2. Recent trends in the youth labour market
Conditions before the economic crisis and its current impact
Before the onset of the economic crisis, youth labour market conditions had shown some improvement in
most OECD countries …
5. Following the generalised improvements in labour market conditions observed in many OECD
countries over the decade to 2005-07, the youth unemployment rate declined slightly, from 16%
in 1995-97 to 14.4% in 2005-07.2 Many countries experienced a decreasing trend in youth unemployment
(particularly Spain, Italy and Ireland and Finland in Quadrants A and C, Figure 1), but there are significant
cross-country differences, both in the level of youth unemployment at the onset of the crisis, as well as in
the evolution of unemployment in the preceding decade. The countries better placed at the onset of the
crisis were those with a relatively low youth unemployment rate or at least with clear signs of a decreasing
rate over the previous decade (Netherlands and Denmark in Quadrant C, Figure 1).
Figure 1. Mixed performance of the youth unemployment rate in 2005-07 compared with the previous decade
As a percentage of the labour force
A Higher than OECD average in 2005-07 but decreasing more than the OECD average
B Higher than OECD average in 2005-07 and increasing more than the OECD average
C Lower than OECD average in 2005-07 and decreasing more than the OECD average
D Lower than OECD average in 2005-07 but increasing more than the OECD average
30
Youth unemployment rate in 2005-07
POL
28
A B
26
SVK
24 GRC
22 ITA
SWE
20 FRA BEL
HUN TUR
ESP OECD average
18
FIN PRT CZE
16
LUX
14
GBR DEU
12 CAN
AUS USA
10 NZL KOR
IRL NOR AUT
JPN
8 NLD DNK ISL
C MEX
CHE
D
6
-22 -20 -18 -16 -14 -12 -10 -8 -6 -4 -2 0 2 4 6 8 10
Change in youth unemployment rate between 2005-07 and 1995-97
How to read the figure? Denmark located in Quadrant C had a youth unemployment rate of 7.8% in 2005-07 and experienced a
decrease of 1.9 percentage points of its rate compared with 1995-97.
Source: National labour force surveys.
2. In this document, the youth population comprises the 15-24 age group (16-24 for Iceland, Norway, Spain,
Sweden, the United Kingdom and the United States) and the adult population the 25-54 age group, except
when otherwise specified.
10DELSA/ELSA/WD/SEM(2010)6
…but even in good times, youth tend to be more vulnerable to unemployment than adults…
6. The observed improvements in youth labour markets over this period cannot, however, hide the
relatively higher vulnerability of youth to unemployment and inactivity (Table 1).
Table 1. Scoreboard for youth, 1998 and 2008
a b
Australia Canada Japan United States EU15 OECD
1998 2008 1998 2008 1998 2008 1998 2008 1998 2008 1998 2008
Employment rate
(% of the age group) 59.9 64.3 52.5 59.6 44.6 41.4 59.0 51.2 41.5 43.0 44.5 43.9
Unemployment rate (UR)
(% of the labour force) 14.6 8.9 15.2 11.6 7.7 7.2 10.4 12.8 16.7 14.6 14.8 13.2
Relative UR youth/adult
(15-24)/(25-54) 2.4 2.6 2.1 2.3 2.3 1.9 3.0 2.7 2.3 2.8 2.4 2.8
Unemployment to population
ratio (% of the age group) 10.3 6.3 9.4 7.8 3.7 3.2 6.9 7.5 7.6 6.8 7.1 6.1
Incidence of long-term
unemployment
(% of unemployment) 19.0 8.6 5.8 2.1 13.3 23.8 4.9 7.1 28.1 21.4 21.8 18.8
Incidence of temporary work
(% of employment) - - 27.5 27.2 20.5 26.0 - - 35.0 39.9 30.2 35.4
Incidence of part-time work
(% of employment) 42.0 40.5 45.3 44.9 23.5 25.8 34.7 34.1 20.5 25.4 20.5 24.8
NEET rate
c
(% of the age group) 12.9 8.7 11.4 9.7 7.7 7.6 10.8 11.2 11.8 10.2 13.4 11.2
School drop-outs
d
(% of the age group) 19.4 12.8 9.6 8.6 4.1 4.5 9.9 7.9 16.7 13.3 17.0 14.4
Relative UR low skills/high skills
c
(ISCED3) 3.0 3.5 2.6 2.6 3.6 - 5.8 4.5 2.0 2.0 2.4 2.2
ISCED 3: International standard classification of education referring to upper secondary education; NEET: neither in employment, nor
in education or training; UR: unemployment rate.
a) Un-weighted average for the following 15 European Union countries: Austria, Belgium, Denmark, Finland, France, Germany,
Greece, Ireland, Italy, Luxembourg, Netherlands, Portugal, Spain, Sweden and United Kingdom.
b) Un-weighted average for the 30 OECD countries.
c) 1997 and 2007.
d) Share of youth not in education and without an ISCED 3 educational attainment; 1997 and 2007; 2003 instead of 2007 for Japan.
Source: National labour force surveys; and OECD Education database.
7. In 2008, the youth/adult unemployment ratio was 2.8 on average in the OECD area, with large
differences across countries (Figure 2). In fact, all the countries are located above the line where youth face
the same risk of unemployment than adults. Germany has the lowest ratio (1.5), largely because of a rather
successful apprenticeship system that ensures a relatively smooth transition from school-to-work for most
youth (Duell, 2008).The ratio was between 2 and 3 in most OECD countries, between 3 and 4 in seven
countries (Denmark, Finland, Italy, Korea, New Zealand, Norway and United Kingdom) and above 4 only
in Iceland and Sweden. Young workers are disproportionately affected by labour mobility in Sweden
because the majority of young workers are on temporary contracts and the “Last-in First-Out” rule is
strictly enforced in case of lay-offs (OECD, 2008h).3
3. See also the OECD report on “Learning for Jobs in Sweden” which stresses that upper secondary
vocational education and training (VET) in Sweden does not succeed in making students “job-ready” –
creating a potential mismatch in a labour market governed by collective agreements in which employers
may be reluctant to take on such young people (Kuczera et al., 2008).
11DELSA/ELSA/WD/SEM(2010)6
Figure 2. Youth face a much higher risk of unemployment than adults, 2008
As a percentage of the labour force
27
Youth unemployment rate
4 times as large ESP
24
2 times as large
ITA
21 OECD average GRC TUR
HUN SVK
SWE
FRA
18
POL
PRT
15 FIN
GBR BEL
LUX
USA
12 CAN
NZL IRL
DEU
KOR CZE Equal
9 ISL AUS
NOR DNK AUT
CHE JPN
6 MEX
NLD
3
0
0 1 2 3 4 5 6 7 8 9 10 11 12
Adult unemployment rate
How to read the figure? All countries above the “Equal” line have a higher youth unemployment rate than that of adults. For example
in Sweden, youth have an unemployment rate that is more than four times that of adults compared with three times in Greece and
twice in Japan.
Source: National labour force surveys.
…and they have already been hard hit by the recession
8. Available statistics up to the fourth quarter of 2009 for most countries suggest a marked increase
in youth unemployment since the recession began, up 18.8% in the OECD area (Figure 3).41 This average
rise of 5.9 percentage points over the past two years is well above the comparative hike in total
unemployment (2.5 percentage points). It implies that nearly 4 million youth have joined the ranks of the
unemployed during the crisis. The most significant increases have been recorded in those countries most
affected by the crisis already in 2008 and early 2009, namely Spain and Ireland with respectively 24.7
and 18.5 percentage points increase in youth unemployment rates compared with the fourth quarter of 2007
(Quadrant B, Figure 3). In Spain, most of the job losses were recorded among workers on temporary jobs,
many of whom are youth.
4. The figures are non-seasonally adjusted. The corresponding seasonally-adjusted youth unemployment rate
is 19.7%. The estimated change in youth unemployment refers to the period from the third quarters of 2007
and of 2009 for Australia, Greece, Iceland, Italy, Mexico, New Zealand, Norway, Turkey and United
Kingdom and between the fourth quarters of 2007 and of 2009 for all other OECD countries.
12DELSA/ELSA/WD/SEM(2010)6
a
Figure 3. Significant deterioration of the youth unemployment rate in 2007-09
A Higher than OECD average in Q4-2009 but increasing less than the OECD average
B Higher than OECD average in Q4-2009 and increasing more than the OECD average
C Lower than OECD average in Q4-2009 and increasing less than the OECD average
D Lower than OECD average in Q4-2009 but increasing more than the OECD average
45
A B
Youth unemployment rate in Q4-2009
ESP
40
(% of the labour force)
35
SVK
30
HUN
IRL
FRA
GRC
25 POL
ITA SWE
BEL
TUR
20 FIN CZE
PRT GBR
USA
LUX
CAN NZL
15 KOR
AUS
MEX AUT ISL
JPN
10
DEU
DNK OECD average
C CHE NLD
NOR D
5
-2 0 2 4 6 8 10 12 14 16 18 20 22 24 26 28
Difference in youth unemployment rate between Q4-2009 and Q4-2007
How to read the figure? The youth unemployment rate reached 43.5% in Spain (located in Quadrant B) in the fourth quarter of 2009,
an increase of 24.7 percentage points since the fourth quarter of 2007.
a) Non-seasonally adjusted rates referring to the fourth quarter for all countries, except for Australia, Greece, Iceland, Italy, Norway,
Turkey and United Kingdom for which data refer to the third quarter.
Source: National labour force surveys.
Youth unemployment is expected to remain high in 2010 and 2011…
9. Figure 4 presents estimates of the likely evolution of youth unemployment rates in 2010
and 2011. These estimates are based on the latest OECD economic projections in November 2009
(OECD, 2009f) and on the assumption that the youth to overall unemployment rate remains constant at its
level on the third quarter of 2009 throughout the projection period. Youth unemployment rates could reach
in 2010 on average 19% for G7 countries, 20.5% for OECD countries and about 24% for EU countries
(Figure 4). It represents a hike respectively of 6, 7 and 8 percentage points since the onset of the crisis
in 2007. Among G7 countries, Japan is expected to experience a rather stable youth unemployment rate
in 2010 and 2011, while some easing is expected in the United States and Canada, but only from the
second-half of 2010. In the other four G7 countries (France, Germany, Italy and United Kingdom), a slight
further increase in the youth unemployment rate is expected over the next two years. The main message is
that in OECD countries, in the early 2010s, youth unemployment rates should be everywhere much higher
than their pre-crisis levels, in particular three times higher in Ireland and twice higher in Spain. Even the
best performing countries such as Denmark and the Netherlands should experience in 2010 a significant
increase in their youth unemployment rates before they stabilise at a two-digit level (around 10-11%)
in 2011.
13DELSA/ELSA/WD/SEM(2010)6
Figure 4. Persistence of high youth unemployment rates in 2010 and 2011a
Youth unemployment as a percentage of youth labour force
United States United Kingdom
OECD EU19 G7
Canada Japan
30.0 30.0
27.5 Projections 27.5 Projections
25.0 25.0
22.5 22.5
20.0 20.0
17.5 17.5
15.0 15.0
12.5 12.5
10.0 10.0
7.5 7.5
5.0 5.0
Spain Ireland Sweden
France Germany Italy
Netherlands Denmark
45 45
40 40
Projections Projections
35 35
30 30
25 25
20 20
15 15
10 10
5 5
0 0
a) Projections of youth unemployment rates by country for 2010 and 2011 are based on the seasonally-adjusted youth
unemployment rates for the third quarter of 2009 projected following the latest OECD projections by country of the total
unemployment rate and holding constant the ratio of youth to total unemployment rate of the third quarter of 2009.
Source: National labour force surveys and OECD (2009f), OECD Economic Outlook, No. 86.
A number of factors make youth particularly exposed to a major downturn
Youth unemployment is more responsive to the business cycle …
10. Across the OECD area, youth unemployment is more responsive to the business cycle than adult
unemployment, particularly in some of the continental European countries and the transition economies of
Eastern Europe (Figure 5). A number of factors contribute to explain the higher business-cycle sensitivity
for youth in the labour market, but the dominant interrelated factors are their disproportionate presence
among those holding temporary jobs and their high concentration in certain cyclically-sensitive industries
such as construction (OECD, 2009b).
14DELSA/ELSA/WD/SEM(2010)6
a
Figure 5. Youth unemployment is more responsive to the cycle than adult unemployment
% point change in the response to a 1 % point deviation from the growth rate of potential GDP, 1996-2007
Youth unemployment rate elasticity 4.5
POL
4.0
3.5 Fitted line
3.0 Stronger
sensitivity
PRT FIN
SVK
2.5 FRA
CZE
ESP
AUS
2.0 GBR
OECD average NOR CAN
USA
1.5 NZL
BEL
DEU
KOR NLD DNK Same sensitivity
1.0 AUT
CHE
SWE
0.5 JPN
LUXISL TUR
IRL MEX
0.0
0.0 0.3 0.5 0.8 1.0 1.3 1.5 1.8 2.0
Adult unemployment rate elasticity
How to read the figure? Across the OECD, a 1 percentage point deviation from the growth rate of potential GDP in the period 1996-
2007 has led to a 0.65 percentage point change in the adult unemployment rate. But the youth unemployment rate has changed by
almost 1.4 percentage points.
a) The “same sensitivity” line represents the locus of points where the youth unemployment elasticity to the business cycle is the
same as that of the adult unemployment. Countries above this line have a higher sensitivity of the youth unemployment rate than that
of adults and vice versa.
Source: Estimations based on National Labour Force Surveys and OECD National Accounts database.
…and with a risk of “scarring” effects for the most disadvantaged youth
11. Coping with a job loss in a recession and the likely protracted period of unemployment is
difficult to handle for all workers. For most youth, the substantial effects of early unemployment on
subsequent labour market and social outcomes have been found to be temporary, i.e. they diminish with
time. But for disadvantaged youth lacking basic education, a failure in their first experience on the labour
market is often difficult to make up and may expose them to long-lasting “scarring” effects (Box 1).
15DELSA/ELSA/WD/SEM(2010)6
Box 1. The potentially scarring effects of unemployment on youth
“Scarring” means that the mere experience of unemployment will increase future unemployment risks and/or
reduce future earnings, mainly through effects associated with human capital (i.e. deterioration of skills and foregone
work experience) or signaling effects (i.e. periods of unemployment convey a signal of low productivity to potential
employers). The longer the unemployment spell lasts, the more individual productivity will be affected and the lower the
level of initial qualification, the longer the scarring effects are likely to last.
Most studies find that, on average, early youth unemployment has serious negative effects on incomes, but not
as strong effects on future risk of unemployment (Ellwood, 1982, and Mroz and Savage, 2006, using the US National
Longitudinal Survey of Youth; Gregg, 2001, Gregg and Tominey, 2005, and Arulampalam, 2001, using the UK National
Child Development Study). While the reduced employment effects are estimated to be short-lived by Ellwood (1982)
and Mroz and Savage (2006) in the United States. Gregg (2001) suggests that youth unemployment does impose a
long-lasting unemployment scar in the United Kingdom: an extra three months unemployment before age 23 led to
another extra two months out of work (inactive or unemployed) between ages 28 and 33. But most studies agree that
what appear to persist are the effects of lost work experience on wages. Mroz and Savage (2006) found that a six-
month spell of unemployment at age 22 would result in an 8 percent lower wage at 23 and even at ages 30 and 31
wages were 2-3% lower than they would have been otherwise. And Gregg and Tominey (2005), controlling for
education, region, wealth of the family and personal characteristics, found a scar from one year of youth
unemployment at the age of 22 in the range of 13-21% twenty years later in the United Kingdom. In particular,
unemployment immediately upon graduation from college is associated with substantial and permanent future earnings
losses (Oreopoulos et al., 2008; Gartell, 2009). The potentially long-lasting effects of unemployment among youth also
depend on the overall labour market conditions in which it takes place.
More generally, Bell and Blanchflower (2009) find evidence that spells of unemployment while young often
create permanent scars through its harmful effects on a number of outcomes – happiness, job satisfaction, wages
and health – many years later. Moreover, spells of unemployment tend to be particularly harmful to the individual –
and to society – when the most disadvantaged youth become unemployed. This involves significant social as well
as economic costs.
3. Main structural issues affecting youth labour markets
Education matters
Access to employment is closely associated with education achievements …
12. There is a high disparity in employment among youth having left education in OECD countries.
In general, education pays: the employment rate of youth aged 15-29 having left education with a tertiary
diploma is higher than the employment rate of those with an upper secondary diploma, which is in turn
higher than that of those with no diploma, except in Italy (Figure 6). Many unskilled school-leavers are ill-
prepared for to-day’s labour market: the lack of an upper secondary education qualification, generally
regarded as the minimum credential required for successful labour market entry and a basis for further
participation in lifelong learning, puts them at a disadvantage in the labour market.
16DELSA/ELSA/WD/SEM(2010)6
Figure 6. High disparity of employment rates of youth aged 15-29 having left education by educational
attainmenta and country, 2007
As a percentage of youth aged 15-29 having left education
Tertiary education
Upper secondary education
Less than upper secondary education
100
90
80
70
60
50
40
30
20
10
0
How to read the figure? In Italy, the employment rate of 15-29 out-of-school in 2007 was 66% for tertiary graduates, 72% for upper
secondary graduates and 53% of youth without qualification.
a) The share of youth in employment with less than upper secondary education is indicated in parenthesis for each country.
Source: OECD Education database.
…but education also influences the quality of jobs youth have access to
13. Many youth jobs are temporary. The incidence of temporary employment among young workers
aged 15-24 was 35% in 2008 on average in the OECD area, an increase of almost 5 percentage points
since 1998 (Figure 7). The incidence of temporary contracts differs a lot across countries. At least half of
all young workers have a temporary contract in Poland, Spain, Sweden, Portugal, France, Germany and
Switzerland.5 But this proportion falls to 20% or less in Hungary, the Czech Republic, the
Slovak Republic, Turkey and the United Kingdom.
5. In Germany and Switzerland, temporary contracts are mainly apprenticeship contracts.
17DELSA/ELSA/WD/SEM(2010)6
a
Figure 7. The precariousness of youth jobs has increased in most OECD countries, 1998 and 2008
Temporary employment as a percentage of youth employment
80
2008
70
1998
60
50
OECD 2008 = 34.8
40 OECD 1998 = 30.4
30
20
10
0
How to read the figure? The proportion of temporary employment in youth employment was 63% in 2008 in Poland and increased of
30.4 percentage points during the last decade.
a) Data for Greece refer to 2001 instead of 2008; for Mexico to 2004 instead of 2008; for Poland to 2001 instead of 1998.
Source: National labour force surveys.
14. However, the increase in the incidence of temporary jobs should not necessarily be regarded as
negative in terms of the career prospects of those youth holding these jobs. For many youth, temporary
contracts are more often a stepping stone to a permanent contract than a dead end.6 Among the nine
European countries where data are available, the probability for youth of getting a permanent job one year
after being on a temporary job is higher than after being unemployed (Figure 8). This probability is
generally higher for youth with tertiary education than for those with lower levels of education.
Figure 8. Towards stable youth employment: impact of unemployment and the stepping-stone effect of
temporary jobs
Estimated probability of being on a permanent contract in 2006 conditional on the status in 2005,
by educational level
70
Unemployed a year earlier Temporary job a year earlier
60
50
40
30
20
10
0
Total Tertiary Total Tertiary Total Tertiary Total Tertiary Total Tertiary Total Tertiary Total Tertiary Total Tertiary Total Tertiary
United Kingdom Ireland Belgium Luxembourg France Greece Finland Italy Spain
How to read the figure? In France, the probability of being on a permanent contract for a young person in 2006 was 15% if s/he was
unemployed in 2005 and 20% if s/he was on a temporary contract in 2005. The probability is higher for a young person with a tertiary
education (respectively 17 and 25%).
Source: European Survey on Income and Living Conditions (EU-SILC) 2005-2006 and the British Household Panel Survey for the
United Kingdom.
6. See Cockx and Picchio (2009) who find that short-lived jobs (lasting less than one quarter and
involuntarily ending in unemployment) tend to be stepping stones to long-lasting jobs (lasting more than
one year) for Belgian long-term unemployed school-leavers.
18DELSA/ELSA/WD/SEM(2010)6
Employment outcomes are strongly influenced by the length and quality of the transition from school to
work
Two groups of youth are particularly at risk of poor employment outcomes
15. Only a small fraction of youth settles into career employment or persistent inactivity shortly after
leaving education. Many youth move in and out of the labour market before finding a job that offers them
career prospects and some stability. Others withdraw from the labour market for a prolonged period of time
or return to education. And even among those who quickly move from school to employment, the labour
contract may only be of short duration and/or with limited career prospects. While some of those on these
precarious and/or temporary jobs swiftly move to more stable and promising jobs, others cycle between
precarious jobs and unemployment or inactivity.
16. In a detailed examination of the duration and outcomes of the school-to-work transition in a wide
range of OECD countries, the OECD Jobs for Youth review identified two groups that face particular
difficulties in getting a stable job after leaving school: the group of so-called “youth left behind” and the
group of so-called “poorly-integrated new entrants”. There is a group of “youth left behind” in all the
OECD countries but the group of “poorly-integrated new entrants” is particularly large in France, Greece,
Italy, Japan and Spain.
17. While the characteristics of the group of youth left behind differ from one country to another,
they share the common fact of cumulating multiple disadvantages. Youth in this group tend to lack a
diploma, come from an immigrant/minority background and/or live in disadvantaged/rural/remote
neighbourhoods. The size of this group can be proxied by the number of young people who are neither in
employment, nor in education or training (NEET). This group represented 11% of 15-24-year-olds on
average in the OECD in 2007. Among them, two in three were already far removed from the labour
market, either because they had been unemployed for more than a year or were inactive and did not seek a
job (Figure 9).
a
Figure 9. NEET youth at risk of losing contact with the labour market, 2007
As a percentage of the youth population
45
Short-term unemployed
40
35
Long-term unemployed
30
25
20 Inactive
15
10
5
0
How to read this figure? In the United Kingdom, 14.3% of youth were NEET in 2007 of which 34% short-term unemployed, 7% long-
term unemployed and 59% inactive,
a) NEET youth refer to youth neither in employment, nor in education or training.
Source: National labour force surveys.
19DELSA/ELSA/WD/SEM(2010)6
18. It is crucial that these youth left behind are helped to find a job as soon as possible after they have
left school or be offered the possibility to participate in a programme to obtain a recognised qualification or
diploma. Otherwise, they risk being trapped in long-term unemployment and inactivity, which implies
considerable individual distress and a lasting social cost for society.
19. The second group of youth facing difficulties is the group of poorly-integrated new entrants.
While these young people often have diplomas, they often find it difficult to find stable employment, even
during periods of strong economic growth. They frequently go back and forth between temporary jobs,
unemployment and/or inactivity. This second group accounts for about 20-30% of all youth on average in
the OECD and tends to be larger in many Continental European countries and Japan than in the United
States and other English-speaking countries (Box 2). Adjustments to the way the labour market functions
in general are necessary to ensure that this second group rapidly accesses stable jobs that offer better
prospects for a career progression.
20. About 30-40% of school-leavers in the OECD are thus estimated as being at risk of facing
persistent difficulties in their access to stable employment. The OECD Jobs for Youth review clearly shows
that the school-to-work transition is smoother in low-regulated labour markets where “first jobs”, even
non-standard ones, act rapidly as a stepping stone to a career. The transition appears also easier for youth
having obtained at least an upper secondary qualification. Finally, apprenticeship training and other
vocational education programmes appear to be efficient school-to-work pathways, particularly for
secondary students, provided that the skills obtained are relevant to labour market needs. Indeed, one might
argue that a dual system is an important complement in a regulated labour market (e.g. in Germany,
Austria, etc.) in order to secure a successful school-to-work transition for most youth.
Box 2. School-to-work transition pathways of students having left secondary education
To account for the dynamic nature of youth labour market situations and identify the different pathways that youth
can take after leaving secondary education, Quintini and Manfredi (2009) exploit monthly observations in the National
Longitudinal Survey of Youth for the United States and the European Community Household Panel survey for Europe.
Figure A shows the share of youth in one of four key pathways identified by Quintini and Manfredi (2009). Over a
five-year period after leaving education: “High performers” spend most of their time – 70% or more – in employment
and take less than six months to find their first job after leaving school; “Poorly-integrated new entrants” move in and
out of employment, unemployment, inactivity and sometimes education, signaling difficulties in settling on a promising
career path; “Left-behind” youth spend most of the five years in unemployment or inactivity; “Returning to education”
leave education for a spell on the labour market of varying length but ultimately return to complete high school – if they
have dropped out before completion – or to attend tertiary education.
The United States has a significantly larger share of high performers than Europe and many more youth return to
education after a spell out of work and studying.* As a result, the share of youth facing serious difficulties on the labour
market –left behind and poorly-integrated new entrants – is 18 percentage points smaller in the United States than in
Europe. In Europe, 30% of youth face difficulties settling into the labour market and another 15% are trapped in long-
term unemployment or inactivity. On the other hand, in the United States, poor integration affects 21% of youth and the
fact that long-term unemployment is uncommon reduces the share of youth Left Behind to just 6% of youth facing long-
term inactivity.
(cont.)
20DELSA/ELSA/WD/SEM(2010)6
Figure A. Key School-to-work transition pathways in the United States and Europe
Europea United States
High perfomers
15%
25%
40% Poorly-integrated new entrants
15% 48%
6%
Left-behind
21% Returning to education
30%
a) The European countries included are: Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg,
Spain, Portugal and the United Kingdom. The empirical analysis includes control for country-specific effects and other key individual
characteristics.
Source: OECD Secretariat calculations based on the National Longitudinal Survey of Youth (NLSY) 1997 and European Community
Household Panel (ECHP) survey, waves 1 to 8 (1994 to 2001). Adapted from Quintini and Manfredi (2009).
Unsurprisingly, significant variation in the size of the at-risk groups can be observed across European countries.
Quintini and Manfredi (2009) show that countries with strong apprenticeship systems and/or low-regulated labour
markets – notably, Germany and the United Kingdom – have the largest shares of high performers. Indeed, with highly
regulated labour markets it is very important to have strong vocational education and training systems to compensate
for these rigidities (e.g. Germany, Austria). On the other hand, southern European countries with a high incidence of
temporary work – notably, Italy and Spain – have the largest share of youth left behind.
* It should be kept in mind, however, that the criterion of success here is employment, not wages or fringe
benefits. If the latter was used, the United States might look somewhat less “successful” compared with some
European countries.
4. Key short-term challenges and policy options
The current economic downturn is putting these disadvantaged youth under even greater stress
21. The economic downturn is pushing more and more youth, even those who would have performed
well in good times, into the group of “poorly-integrated new entrants” and possibly even into the group of
“youth left behind”. This reinforces the pressure for governments to intervene vigorously in the youth
labour market.
22. In the short term, the main objective is to ensure that both new entrants and those who already
encountered difficulties in getting a job remain connected to the labour market. In this context, it is of
paramount importance that governments act quickly to provide more job-search assistance and guidance
for all youth experiencing difficulties in finding a job in the current labour market, and target well-
designed active labour market programmes to the most disadvantaged of them.
23. The current economic downturn can also be an opportunity to tackle some of the underlying
problems that many youth face in their transition from school to work and early career progression. In
particular, governments should prevent youth from dropping out of education and address some of the
asymmetries in the labour markets present in many OECD countries that put youth at a disadvantage. In a
number of countries, the main demand-side barriers faced by youth include high labour costs, partly due to
relatively high minimum wages, unbalanced employment protection legislation between temporary and
permanent contracts and, for youth from ethnic minorities, persisting discrimination practices.
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